Market Talk
– The US dollar was headed for its best week in seven months on Friday after breaking through key levels against the euro as traders increased bets on multiple U.S. interest rate hikes in 2022. Investor sentiment was also bolstered by US GDP data which grew a better-than-expected 6.9% quarter-on-quarter in the fourth quarter of 2021.
– The greenback also leapt against the yuan on Thursday – its best session in seven months – as softening industrial profit growth in China bolstered the case for monetary easing there while the Fed is on an aggressive hike path.
– Sterling was pushed to a one-month low of $1.3360 overnight and hovered at $1.3385 as traders turn their focus to a Bank of England meeting next week. Rates markets have priced a 90% chance of a hike.
– The euro fell almost 0.9% to a 20-month low of $1.1131 while the yen fell 0.6% against the greenback to $115.45. The New Zealand dollar was kept under pressure and edged to a fresh 15-month low of $0.6570.
– Gold was up on Friday morning in Asia but moves remained small and the yellow metal was headed for its sharpest weekly decline since November 2021. Investors continue to digest the U.S. Federal Reserve’s policy latest policy decision that drove the US dollar to a multi-month high.
Chart Focus GBP/USD
Key Points
1. Sell GBP/USD recommendation.
2. Sell GBP/USD at 1.3440. Stop at 1.3470 and profit target at 1.3360.
3. Potential military conflict in Ukraine and UK PM’s breach of lockdown rules are both likely to aid the US dollar.
4. Price is likely to be capped by a strong resistance and MACD is hinting at a bearish price trend.
Fundamental Comments
1. Potential military conflict in Ukraine is aiding the safe haven US dollar
2. An investigation into whether UK PM Boris Johnson breached COVID-19 lockdown rules is weighing on the pound.
Technical Comments
1. Price is likely to be capped by the 20EMA line as well as a previous support turned resistance line.
2. MACD remains bearish and is hinting at a bearish price trend.
Key Levels
| Support | 1.3385 | 1.3345 | 1.3295 |
| Resistance | 1.3415 | 1.3450 | 1.3490 |
Technical Overview
USD/JPY – Last night, price broke above the neckline of a Double Bottom chart pattern, hinting at more price upsides ahead. The chart pattern has a price target at 116.50 and we think price is likely heading towards this point in the next few days. Stochastic has reached the overbought zone and is hinting at a price correction. MACD and 20EMA remains bullish and is hinting at a bullish price trend.
| Support | 115.15 | 114.80 | 114.45 |
| Resistance | 115.50 | 115.95 | 116.50 |
EUR/USD – Price broke below an important support and a previous low at 1.1185 last night, sliding down to 1.1131, which is also a 20-month low. Stochastic is in the oversold zone but both MACD and 20EMA are hinting at a strong bearish price trend. The bearish trend is likely to remain in force unless price can move above 1.1230. We could see a corrective rally to 1.1185 before the downtrend resumes.
| Support | 1.1130 | 1.1100 | 1.1070 |
| Resistance | 1.1160 | 1.1190 | 1.1225 |
USD/CNH – We saw a sharp price rally to 6.3753 but this bullish price trend is not over as yet. We are likely to see a corrective decline to the 20EMA at 6.3510 and from there we could see a rally to test the high of 6.3753 again. Stochastic is in the overbought zone but MACD remains bullish. 20EMA is pointing up with a steep slope, which is a hint of a strong bullish price trend ahead.
| Support | 6.3555 | 6.3380 | 6.3220 |
| Resistance | 6.3680 | 6.3750 | 6.3910 |
XAU/USD – After reaching a high of $1853 on Tuesday, we have seen price declined to a low of $1791.75. Stochastic is already in the oversold extreme but 20EMA is pointing lower with a steep slope, hinting at a strong bearish price trend. MACD is also hinting at a strong bearish price trend. We are likely to see a corrective rally to $1800 due to the oversold condition but this could be a good opportunity to get into a short position.
| Support | 1791.75 | 1783.15 | 1775.20 |
| Resistance | 1805.60 | 1816.20 | 1828.05 |
EUR/JPY – We had a buy call yesterday but our call was stopped out last night when price declined to a low of 128.32. We are out of this position with a 30 pips loss. Stochastic has a bullish crossover and is moving higher and hinting at a bullish price trend. MACD and 20EMA are both turning bullish. We could see a rally to 129.30 if price can stay above the support at 128.40.
| Support | 128.35 | 128.00 | 127.65 |
| Resistance | 128.85 | 129.25 | 129.50 |